WeWork’s parent, We Co., has raised billions of dollars from private investors, including
SoftBank Group Corp.
9984 3.20%
at a $47 billion valuation. The shared-office company is having a harder time convincing potential public-market investors it’s worth even half that much ahead of a planned initial public offering. Here are some of the issues investors are weighing as they scrutinize the business and growth prospects of We, which declined to comment.

We’s revenue is growing fast, but so are its expenses.

In 2018, We took in $1.8 billion in revenue—but for every dollar the company generated, it spent nearly two. The biggest expense: rent to landlords, which is equal to 65% of We’s revenue.

We's revenue and expenses

$1.8B

$1.2B

Rent

$669.5M

Location

operations

477.3

Growth/new markets

PROFIT

357.5

Administration

Total expenses

$3.5 billion

313.5

Depreciation

287.5

Sales and marketing

106.8

Other

91.2

Advertising

41.7

Pre-opening

Source: the company

We's revenue and expenses

$1.8B

$1.2B

Rent

$669.5M

Location

operations

477.3

Growth/new markets

PROFIT

357.5

Administration

Total expenses

$3.5 billion

313.5

Depreciation

287.5

Sales and marketing

106.8

Other

91.2

Advertising

41.7

Pre-

opening

Source: the company

We's revenue and expenses

$1.8B

$1.2B

Rent

$669.5M

Location

operations

477.3

Growth/new markets

PROFIT

357.5

Administration

Total expenses

$3.5 billion

313.5

Depreciation

287.5

Sales and marketing

106.8

Other

91.2

Advertising

41.7

Pre-

opening

Source: the company

We's revenue and expenses

$1.8B

$1.2B Rent

$669.5M

Location operations

477.3

Growth/new markets

PROFIT

357.5

Administration

313.5

Depreciation

287.5

Sales and marketing

Total expenses

$3.5 billion

106.8 Other

91.2

Advertising

41.7

Pre-opening

Source: the company

We’s operating losses are keeping pace with its revenues.

Investors aren’t necessarily expecting startups to be profitable by the time they go public. However, a company’s ability to show that losses are slowing or shrinking—even as the company grows—often gives investors comfort the business is sound, and will eventually turn a profit. Many companies that went public this year show a widening gap between revenues and operating losses—but the two measures are growing in tandem for We.

Quarterly revenue and operating loss/income, leading up to IPO

We

$807.8M

$800 million

Secondary

stock-

compensation

expense

Revenue

600

(Operating loss)

$729.7M

400

200

0

1Q

’17

’18

’19

2016

$600 million

Lyft

Pinterest*

Slack

400

200

0

1Q

’18

2Q

’18

’19

1Q

’18

2017

2017

2017

*Had operating income in 4Q 2017 and 4Q 2018

Source: the companies

Quarterly revenue and operating loss/income, leading up to IPO

We

$807.8M

$800 million

Secondary

stock-

compensation

expense

600

Revenue

$729.7M

(Operating loss)

400

200

0

1Q

’17

’18

’19

2016

$600 million

Lyft

Pinterest*

Slack

400

200

0

1Q

’18

2Q

’18

’19

1Q

’18

2017

2017

2017

*Had operating income in 4Q 2017 and 4Q 2018

Source: the companies

Quarterly revenue and operating loss/income, leading up to IPO

We

$807.8M

$800 million

Secondary

stock-

compensation

expense

Revenue

600

(Operating loss)

$729.7M

400

200

0

1Q

’17

’18

’19

2016

$600 million

Lyft

Pinterest*

Slack

400

200

0

1Q

’18

2Q

’18

’19

1Q

’18

2017

2017

2017

*Had operating income in 4Q 2017 and 4Q 2018

Source: the companies

Quarterly revenue and operating loss/income, leading up to IPO

Revenue

(Operating loss)

We

$807.8M

$800 billion

Secondary

stock-

compensation

expense

600

400

$729.7M

200

0

1Q

’17

’18

’19

2016

$600 million

Lyft

Pinterest*

400

200

0

’18

1Q

1Q

’18

2017

2017

Slack

$200 million

*Had operating income in 4Q 2017 and 4Q 2018

0

2Q

’18

’19

2017

Source: the companies

We is raising increasingly large sums...

We has raised more than $10 billion in nine years by turning to venture capital firms, then banks, then mutual funds and ultimately SoftBank. The cash has, in turn, been used to build out We’s growing number of offices.

Raised

We’s amount raised and valuations, by venture-capital round

Valuation

Investor(s)

Amounts

First round (July 2012)

$17.0M

Benchmark Capital

$75.5M

Second (May 2013)

$40.0M

Jefferies Financial

$167.8M

Third (February 2014)

$150.0M

JPMorgan Chase

$1.5B

4th (December 2014)

T Rowe Price

$355.0M

and Goldman Sachs

$5.0B

5th (June 2015)

Fidelity Management

$433.9M

$10.0B

6th (March 2016)

Hony Capital

$430.0M

and Legend Holdings

$16.0B

7th (August 2017)

SoftBank Vision Fund

$3.1B

$21.3B

8th (January 2019)

SoftBank Group

$4.0B

Source: Dow Jones Venture Source

$47.0B

We’s amount raised and valuations, by venture-capital round

Raised

Valuation

Investor(s)

Amounts

First round (July 2012)

$17.0M

Benchmark Capital

$75.5M

Second (May 2013)

$40.0M

Jefferies Financial

$167.8M

Third (February 2014)

$150.0M

JPMorgan Chase

$1.5B

4th (December 2014)

T Rowe Price

$355.0M

and Goldman Sachs

$5.0B

5th (June 2015)

Fidelity Management

$433.9M

$10.0B

6th (March 2016)

Hony Capital

$430.0M

and Legend Holdings

$16.0B

7th (August 2017)

SoftBank Vision Fund

$3.1B

$21.3B

8th (January 2019)

SoftBank Group

$4.0B

Source: Dow Jones Venture Source

$47.0B

Raised

We’s amount raised and valuations, by venture-capital round

Valuation

Investor(s)

Amounts

First round (July 2012)

$17.0M

Benchmark Capital

$75.5M

Second (May 2013)

$40.0M

Jefferies Financial

$167.8M

Third (February 2014)

$150.0M

JPMorgan Chase

$1.5B

4th (December 2014)

T Rowe Price

$355.0M

and Goldman Sachs

$5.0B

5th (June 2015)

Fidelity Management

$433.9M

$10.0B

6th (March 2016)

Hony Capital

$430.0M

and Legend Holdings

$16.0B

7th (August 2017)

SoftBank Vision Fund

$3.1B

$21.3B

8th (January 2019)

SoftBank Group

$4.0B

Source: Dow Jones Venture Source

$47.0B

We’s amount raised and valuations, by venture-capital round

Raised

Valuation

Investor(s)

Amounts

$17.0M

First round (July 2012)

Benchmark Capital

$75.5M

$40.0M

Second (May 2013)

Jefferies Financial

$167.8M

Third (February 2014)

$150.0M

JPMorgan Chase

$1.5B

4th (December 2014)

T Rowe Price

$355.0M

and

$5.0B

Goldman Sachs

5th (June 2015)

Fidelity Management

$433.9M

$10.0B

6th (March 2016)

Hony Capital

$430.0M

and

Legend Holdings

$16.0B

7th (August 2017)

SoftBank Vision Fund

$3.1B

$21.3B

8th (January 2019)

SoftBank Group

$4.0B

Source: Dow Jones Venture Source

$47.0B

...but has yet to announce a profit.

It’s not unusual for technology startups to raise lots of money before they turn profitable, as the firms are often more focused in the early years on growing and creating new markets for their products and services. For instance, many of today’s batch of giant startups expect to stay in the red for far longer than a decade. Still, investors do expect to see a clear path to profitability and We hasn’t disclosed any profits since its founding in 2010.

When companies were founded and turned an annual profit relative to the IPO

8 years

7

6

5

4

3

2

1

0

1

2

3

4

5

6

Apple

Founded

Profitable

Facebook

Profitable

before IPO

IPO

Google

Cisco

Qualcomm

Twitter

Groupon

Amazon.com

Year of IPO

Went Public in

2019

Pinterest

Slack

Uber

Lyft

expected to ipo IN

2019

Cloudflare

Postmates

We

Peloton

15

years

14

13

12

11

10

9

8

7

6

5

4

3

2

1

0

Note: calendar years

Source: Dow Jones Venture Source

When companies were founded and turned an annual profit relative to the IPO

8

years

7

6

5

4

3

2

1

0

1

2

3

4

5

6

Founded

Apple

Facebook

Profit

Profitable

before IPO

Google

IPO

Cisco

Qualcomm

Twitter

Groupon

Amazon.com

Year of IPO

Went Public in

2019

Pinterest

Slack

Uber

Lyft

expected to ipo IN

2019

Cloudflare

Postmates

We

Peloton

15

14

13

12

11

10

9

8

7

6

5

4

3

2

1

0

years

Note: calendar years

Source: Dow Jones Venture Source

When companies were founded and turned an annual profit relative to the IPO

8

years

7

6

5

4

3

2

1

0

1

2

3

4

5

6

Founded

Apple

Facebook

Profit

Profitable

before IPO

Google

IPO

Cisco

Qualcomm

Twitter

Groupon

Amazon.com

Year of IPO

Went Public in

2019

Pinterest

Slack

Uber

Lyft

expected to ipo IN

2019

Cloudflare

Postmates

We

Peloton

15

14

13

12

11

10

9

8

7

6

5

4

3

2

1

0

years

Note: calendar years

Source: Dow Jones Venture Source

When companies were founded and turned an annual profit relative to the IPO

Founded

Profit

IPO

8

years

6

4

2

0

2

4

6

Apple

Facebook

Profitable

before IPO

Google

Cisco

Qualcomm

Twitter

Groupon

Amazon.com

Year of IPO

Went Public in 2019

Pinterest

Slack

Uber

Lyft

EXPECTED TO IPO IN 2019

Cloudflare

Postmates

We

Peloton

15

10

5

0

years

Note: calendar years

Source: Dow Jones Venture Source

And a profitable, publicly-traded rival is valued at far less.

IWG PLC, known for its Regus brand, has office and co-working spaces that compete with We and the two companies had a similar number of occupied desks as of mid-2019. But the Switzerland-based IWG has a market capitalization that is about one-tenth the value investors assigned We in January.

We (WeWork) vs. IWG (Regus)

Revenue growth rate

(2Q 2019 vs 2Q 2018)

Valuation

Net income (loss)

12 months ending in June

$47.0 billion

100%

$0.5 billion

$447.2 million*

91.4%

80

0

60

–0.5

40

–1.0

$4.5

billion*

20

–1.5

12.3%

($1.7 billion)

0

–2.0

*Conversion from pounds as of Sept. 10

Source: the companies

We (WeWork) vs. IWG (Regus)

$47.0 billion

Valuation

$4.5 billion*

Revenue growth rate

(2Q 2019 vs 2Q 2018)

Net income (loss)

12 months ending in June

$0.5 billion

100%

$447.2 million*

91.4%

0

80

–0.5

60

–1.0

40

–1.5

20

12.3%

($1.7 billion)

–2.0

0

*Conversion from pounds as of Sept. 10

Source: the companies

We (WeWork) vs. IWG (Regus)

Revenue growth rate

(2Q 2019 vs 2Q 2018)

Valuation

Net income (loss)

12 months ending in June

$47.0 billion

100%

$0.5 billion

$447.2 million*

91.4%

80

0

60

–0.5

40

–1.0

$4.5

billion*

20

–1.5

12.3%

($1.7 billion)

0

–2.0

*Conversion from pounds as of Sept. 10

Source: the companies

We (WeWork) vs. IWG (Regus)

Revenue growth rate

(2Q 2019 vs 2Q 2018)

100%

91.4%

80

60

40

20

12.3%

0

Valuation

$47.0 billion

$4.5

billion*

Net income (loss)

12 months ending in June

$0.5 billion

$447.2 million*

0

–0.5

–1.0

–1.5

($1.7 billion)

–2.0

*Conversion from pounds as of Sept. 10

Source: the companies

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